obsession with the customer, and so on.
(Some of the exemplary companies that
Peters and Waterman mentioned, like
Atari and Wang Labs, ran aground.)
Randall Stross's "The Microsoft Way"
(1996) o ered a formula that was strik-
ingly similar to Schmidt and Rosen-
berg's: "Gates recruited smart people,
put them to work on a campus well
suited for intense concentration, and
maintained their allegiance with stock
options whose value made millionaires
of mere foot soldiers in the product-de-
velopment groups. The organization,
even as it grew large, was deliberately
fashioned to perpetuate the identity of
small groups, and communication, up
and down, was frequent and volumi-
nous."Again, market-dominant compa-
nies had plenty of managerial lessons to
dispense, and these lessons had plenty of
enthusiastic adherents. Drawing grand
lessons from especially vivid and close-
at-hand examples is always tempting.
Using the corporation of the moment as
a model seems so obviously right---how
could it go wrong?
In 1940, a young sociologist named
Robert K. Merton published an
essay called "Bureaucratic Structure and
Personality," in which he coined the
phrase "displacement of goals." Bureau-
cracy develops, Merton wrote, because
large organizations require rules and
procedures, lest they fall into the ad-
ministrative and financial chaos and
governance-by-whim of the kind that
brought down William Durant. But
eventually the rules and procedures de-
vised to help the organization achieve its
goals take on a life of their own, and be-
come "an immediate value in the life-
organization of the bureaucrat." In other
words, when people orient their lives
around the rules, the purpose of the or-
ganization gets lost.
As early as 1957, in a later version of
his essay, Merton reported that "bureau-
cracy" had become a word that nobody
was using positively. Organizations in
general were declining in prestige. Al-
fred Sloan's memoir was published just
at the moment when polls began to
show a growing loss of trust in Ameri-
can institutions, a trend that has contin-
ued for half a century. Within the realm
of corporate management, the very
large company divided into autonomous
divisions was under general attack by
the mid-nineteen-seventies.The last half-
century of management wisdom can be
understood as a long series of attempts
to find a way around the ineluctable
logic of displacement of goals. It would
be hard to find any popular business ad-
vice book since Sloan's that isn't pre-
mised on the notion that the American
corporation needs to be made less scle-
rotic. Bureaucratic processes had become
their own reward: that was goal displace-
ment. A related shift in management
since Sloan's time has been to drop the
social vision of the corporation---more
goal displacement---in the name of eco-
nomic e ciency. This has happened in
many older corporations, like G.M.,
which now has just over two hundred
thousand employees. Google was de-
signed never to have unions or pensions;
the expectation was that most employ-
ees wouldn't plan to stay at the company
for decades. Abandoning the social mis-
sion of the corporation is a management
technique that's seldom openly cele-
brated in business books, but it has been
significant.
As Merton would have predicted,
though, every new strategy for reform-
ing bureaucracy (developing "loose-
tight" organizations, "flattening hierar-
chy," "reëngineering": the formulas are
countless) can itself lead to new forms of
goal displacement. What managers con-
sider a problem is typically what their
predecessor considered a solution. Sloan
had characterized Henry Ford as a char-
ismatic, overly personal manager, but
Ford's invention of the assembly line
was a breakthrough in process improve-
ment that, with modifications, per-
sists to this day. Sloan's multidivisional
("M-form") structure was meant to be
an antidote to the very bureaucratic
gumminess it was later taken to exem-
plify. One should be wary of the argu-
ment that any new company, no matter
how brilliantly successful, has figured it
out in a way that no previous company
ever could have.
There are striking points of a nity
between the old G.M. way and the new
Google way. Among Sloan's achieve-
ments was to be more attuned to what
in Silicon Valley would be called "the
user" than his main rival, Ford, by o er-
ing a range of styles and prices that
more closely followed the subtleties of
demand than did the one-color, one-
style, one-price Model T. It's notable
that Page, Brin, and Schmidt are all en-
gineers; "Google is and always will be an
engineering company" is the corporate
assurance. Sloan, also an engineer, de-
clared, "General Motors is an engineer-
ing organization." Page and Brin an-
nounced, "We will not shy away from
high-risk, high-reward projects because
of short-term earnings pressure." Sloan,
" Your daddy had all the trimmings, son, our nation's highest honor."